Accounts and the end of month balances in key

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accounts and the end-of-month balances in key subsidiary records. Arrow lines are numbered to show the flows of costs for March. Each numbered cost flow reflects several entries made in March. The lower part of the below image shows summarized job cost sheets and their status at the end of March. The sum of costs assigned to the jobs in process ($1,970 + $1,810) equals the $3,780 balance in Goods in Process Inventory shown in the above image. Also, costs assigned to Job B17 equal the $3,360 balance in Finished Goods Inventory. The sum of costs assigned to Jobs B15 and B16 ($3,200 + $2,380) equals the $5,580 balance in Cost of Goods Sold.
10 Job Order Cost Flows and Ending Job Cost Sheets Figure 11 shows each cost flow with a single entry summarizing the actual individual entries made in March. Each entry is numbered to link with the arrow lines in Figure 10. 11 Entries for Job Order Production Costs This provides summary journal entries. Remember, applied overhead is recorded during the period, while actual overhead is recorded at the end of the period. Actual overhead is debited to Factory Overhead. Allocated overhead is credited to Factory Overhead.
Adjusting Factory Overhead Refer to the debits in the Factory Overhead account in Exhibit 15.11 (or Exhibit 15.12 ). The total cost of factory overhead incurred during March is $6,720 ($550 + $5,070 + $1,100). The $6,720 exactly equals the amount assigned to goods in process inventory (see 8). Therefore, the overhead incurred equals the overhead applied in March. The amount of overhead incurred rarely equals the amount of overhead applied, however, because estimates rarely equal the exact amounts actually incurred. This section explains what we do when too much or too little overhead is applied to jobs. Factory Overhead T-Account Figure 12 shows a Factory Overhead T-account. The company applies overhead using a predetermined rate estimated at the beginning of the period. At the end of the period, the company receives bills for its actual overhead costs. 12 Factory Overhead T-account Figure 13 shows what to do when actual overhead does not equal applied overhead. When less overhead is applied than is actually incurred, the remaining debit balance in the Factory Overhead account is called underapplied overhead . When the overhead applied in a period exceeds the overhead incurred, the resulting credit balance in the Factory Overhead account is called overapplied overhead . In either case, a journal entry is needed to adjust Factory Overhead and Cost of Goods Sold. 13 Adjusting Factory Overhead Underapplied or Overapplied Overhead To illustrate, assume that Road Warriors actually incurred other overhead costs of $5,550 instead of the $5,070 shown in Figure 10. This yields an actual total overhead cost of $7,200 in March. Since the amount of overhead applied was only $6,720, the Factory
Overhead account is left with a $480 debit balance as shown in the ledger account in Figure 14.

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